The Commonwealth Bank, National Australia Bank and Westpac on Wednesday became the latest banks to cut fixed rates, each giving customers the chance to secure historically low borrowing costs over the longer term.

Within hours NAB and Westpac had responded by matching the CBA's five-year rate. NAB also cut the rate on its four-year loan to 4.99 per cent and its three-year product to 4.94 per cent.

For a five-year fixed loan with a balance of $400,000, the CBA's reduction lowers monthly repayments by $166 a month, RateCity said.

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The moves are the latest signs of rivalry between banks in the $1.3 trillion mortgage market, but also reflect changes in global financial markets.

The Commonwealth Bank’s general manager of home loans, Clive van Horen, said it had been able to cut fixed interest rates because of changes in global money markets which had made it cheaper for banks to raise longer-term funds. He also argued it was a sign of fierce competition.

“There’s probably more competition today than there’s been in many, many years - some people would say many decades,” Mr Van Horen said.

CBA's reduction comes the bank was last month slammed by a Senate inquiry into a fraud scandal in its financial planning arm, which occurred between 2006 and 2010.

Fixed rates are influenced by the outlook for the cash rate - which the Reserve Bank has left on hold at a record low of 2.5 per cent for almost a year.

Since June, money markets have increased their bets the central bank will cut interest rates further in an attempt to stimulate the economy.

These were bets were wound back slightly on Wednesday, after the annual rate of inflation hit 3 per cent in the June quarter, the top of the Reserve Bank’s target zone.

ANZ Bank interest rate strategist Zoe McHugh said markets were pricing in a 35 per cent chance of a 0.25 percentage point cut from the Reserve by December, and a 50 per cent chance of a cut by February.

Although ANZ and most banks think it is more likely the Reserve will leave rates unchanged, Dr McHugh said investors were concerned by weak consumer confidence and the stubbornly high dollar.

Relatively few customers currently take out five-year loans, but Mr van Horen said he expected an increase in sales of five-year loans after the latest cuts.

NAB's head of retail banking, Gavin Slater, said the bank had experienced stronger demand for fixed-rate products over the last 12 months.

“We know many home owners are looking for certainty, whether they are investors or first home buyers, and NAB is offering that through these market-leading fixed home loan rates,” he said.

Director of interest rate comparison website Mozo, Kirsty Lamont, said banks including ME Bank and NAB-owned UBank had recently cut longer-term fixed rates, and she predicted more reductions from other lenders.

"This year the competition has centred around shorter-term fixed rates. We've seen some signs lately that lenders are starting to increasingly compete around the longer terms," she said.